Commentary: What the Davos crowd needs to understand

One of the themes of this year’s World Economic Forum in Davos this year is “Preparing for the Fourth Industrial Revolution.” How will digital technology and the rise of robots affect job opportunities in the future? Also on the agenda are discussions about globalization -- how it has altered the political and economic landscape, and fueled resentment among workers who feel overlooked and cast aside while those at the top get immensely rich.

This is reminiscent of a debate within economics: Are wage stagnation, high levels of displacement and unemployment in areas like the industrial Midwest and the bleak outlook for the future many people have due to globalization or technological change?

The view of at least one participant at Davos, according to this report, is that most of the manufacturing job losses are attributable to technology rather than globalization. Others, such as Dean Baker at the Center for Economic and Policy Research, see globalization and trade as a key reason for job losses in manufacturing and other industries (along with the decline in workers’ bargaining power due to factors such as the undermining of unions through legislation).

My reading of the evidence is that it was both globalization and technological change, not predominantly one or the other. And since globalization was aided and abetted by technological change -- e.g., it’s much easier to stay in touch with and manage distant subsidiaries due to digital technology, and innovations such as giant container ships have also fueled the move to globalize production -- it’s difficult to separate the two explanations in any case.

What’s important is not what caused so many people to lose their jobs or to find a job (if they could at all) that’s not as good as the one they lost. It’s that the “global elite” begin to fully comprehend how much resentment people feel over what has happened to their lives, to their communities and to their children’s futures. 

I don’t mean to imply that economists shouldn’t continue trying to sort this out. It’s useful to have the best information we can get about the source of this disruptive change, but workers just want decent jobs.

So far, those who have benefited so much from globalization and technological change -- the type of people who attend Davos -- have managed to find scapegoats that deflect blame from themselves. 

The working class is told, for example, that immigration is to blame and a wall is the answer, or that their troubles arise from a government that devotes all of its attention to the “undeserving” poor while ignoring them -- and with Donald Trump in power all that will change. Workers are told it’s because of taxes or regulation: Take care of those and the economy will boom -- America will be great again!

But take a look at what has happened to the share of income since the 1970s. For the majority of Americans, the people who toil all day to provide for their families and do their best to make ends meet each month, wages (adjusted for inflation) have not grown at all, while the incomes of those at the top of the distribution have grown remarkably. 

Globalization and technological change have produced large gains, but they’ve mostly gone to those at the top. The typical worker hasn’t benefited and in many cases has been hurt deeply from the change that made the wealthy even wealthier.

There’s more than enough wealth to go around, more than enough to make everyone better off. But the winners from globalization and technological change have been unwilling to share. 

In fact, they whine for more. They want governments to lower their taxes and spend less on help for those who are struggling in this economy. They want to do away with regulatory agencies such as the Consumer Financial Protection Bureau and to remove constraints on the financial sector put into place after the meltdown so they have even more chances to line their own pockets at the expense of others.

What the men and women at Davos need to understand is that people are catching on and increasingly putting the blame on them. In the U.S., Mr. Trump has mollified these people somewhat, at least for now, as they wait for him to be their champion against the powers that have made their lives so hard. He has promised to bring back the manufacturing jobs that once provided good, stable jobs by closing America’s doors (or at least making them very hard to get in) to goods manufactured in other countries and by reducing immigration.

But those jobs aren’t coming back. Even if manufacturing does return, technological change has replaced most of the people who used to work on the factory floors, and in the end Mr. Trump won’t be able to keep the promises he has made. When people learn they’ve been fooled once again, the global elite will be in their crosshairs.

And that’s the correct target. In the last three or four decades those with political and economic power have done everything they can to tilt the rules in their own favor, and even as they gained so much, they’ve been as stingy as they can possibly be with every single dollar that might go to someone who is less fortunate. 

Even when the difficulties people face came about from economic change that benefited those at the top, they showed little signs of caring, and they did little, if anything, to use their economic and political power to help those who were hurt from technological change and globalization.

We don’t have to close America’s doors to the rest of the world’s goods and services. We hurt only ourselves by doing so, and we needn’t be afraid of technological upheaval. Both of them really can “lift all boats.” 

But for that to happen, the Davos men and women must get over their greed and their lack of compassion for those who’ve paid the price for their fortunes. They must understand that the goose that laid their golden eggs could disappear if things continue as they are. They must be leaders for the political change we need to ensure that everyone benefits as the economy grows.